With 2023 officially in full swing, we thought it would be helpful to look back at 2022’s trends. Throughout 2022, we inevitably saw trends in data security and tax incentives. But, while living in times of record-high inflation, we proposed a variety of strategies that entities may still want to consider when looking at ways to save money amid inflation and recession concerns. Let’s look back at the strategies of 2022.

The Energy Tax Deduction

The Inflation Reduction Act (IRA) introduced a higher energy tax deduction, making going green a more lucrative option. The IRA features numerous tax incentives for renewable energy and clean energy investments. However, entities exempt from federal income taxation, such as local governments, typically do not benefit from tax incentives contained in the Internal Revenue Code. The IRA has changed this dynamic under Internal Revenue Code Section 6417, allowing certain entities to ask the Internal Revenue Service (IRS) for a cash refund in the amount of credit.

Signed into law in August 2022, the Inflation Reduction Act allocates significant funding through competitive grants. State and local governments are eligible for a variety of planning, workforce development and emissions reporting standards grants, as well as workforce development assistance programs and state-based, home energy-efficiency contractor training grants.

Energy, the environment and local infrastructure are all key areas of the IRA that state and local governments need to understand and prepare to access opportunities.

Some of the key grant programs that impact the public sector include but are not limited to:

• $200 million for states to develop training programs for contractors involved in the installation of home energy and electrification improvements and $760 million for grants to state, local and tribal governments and other entities to support accelerated siting of interstate electricity transmission lines.
• $27 billion for the Greenhouse Gas Reduction Fund, with at least 60% of these funds focused on disadvantaged communities. Additional inclusions are Climate Pollution Reduction Grants, Environmental and Climate Justice Block Grants, and reducing air pollution under the Clean Air Act.
• Grants in local infrastructure, including $3 billion for Neighborhood Access and Equity Grants; $1 billion for improving energy efficiency, water efficiency or climate resilience of affordable housing; $1 billion to cover cost of zero-emission school buses, garbage trucks and mass transit buses; and $1 billion to state and local governments to adopt improved building codes.

These changes allow companies to accelerate deductions for the costs of improvements, providing immediate cash flow relief.

Bundling Your Defined Benefit Plan Services

The set payments in retirement provided through defined benefit (DB) plans play a central role in attracting, retaining and rewarding public sector employees. Traditionally, plan sponsors have chosen to address these DB plan needs separately, often selecting different providers for each function. However, we discussed last year that in today’s ever-evolving financial environment, bundling actuarial, investment and administrative services with a single provider can enable defined plan sponsors to take a more holistic, strategic approach and gain valuable synergies.

The need to connect investment strategies, actuarial insights and administrative plan management is increasingly important in optimizing DB plans. Replacing multiple single-focus providers with one provider can create five key advantages for plan sponsors:

1. Increased Responsiveness: Shared data and behind-the-scenes teamwork make responding to shifts in short- and long-term needs and market variables easier.
2. Integrated Consulting: Removing silos created by separate providers better facilitates a combined strategy for plan assets, liabilities and day-to-day experiences, which helps to optimize results.
3. Improved Efficiencies: Integrated end-to-end management of the pension lifecycle and oversight of assets and liabilities streamlines processes, shortens timelines and produces greater operational efficiencies.
4. Simplified Coordination: Plan sponsors save time and resources previously spent on managing multiple providers, which can be refocused on plan strategy and other tasks.
5. Cost Savings: Increased efficiencies and integrated strategies can reduce fees and operational costs.

Assessing & Managing Data Security

Cybersecurity risks evolve rapidly, and public sector entities face additional complexities due to the range of motives attackers have, including financial gain, espionage, ideology and grudges. According to Verizon’s report, the top cyber crimes affecting public sector entities in 2021 were system intrusion, basic web application attacks and miscellaneous errors.¹ The report also emphasizes that ransomware attacks are on the rise in the public sector.

Comprehensive annual cybersecurity audits are essential for effective data security. A cybersecurity audit should include detailed evaluations of current hardware, systems, laptops, customer data and intellectual property that could be affected by a cyberattack. You can also use a risk assessment process to identify system vulnerabilities, including vendor systems, that would create problems if exploited.

Based on your risk assessment, create a detailed written plan that outlines your cybersecurity strategy for protecting your data from cyberattacks, monitoring systems for attempted attacks and responding if an attack occurs. Essential elements to include in your plan are:

• Documentation of policies and procedures involving your data, systems and servers, along with everyone who has access
• Technical cybersecurity protections, such as software to ensure network security and manage remote access
• Cybersecurity monitoring, including regular network penetration tests, access control reviews and physical security assessments

When evaluating cyber insurance options, take a close look at the coverage provided for ransomware attacks. Make sure your policy covers extortion demands, payments and lost income resulting from an attack. It should also protect against a range of risks, including threats to:

• Access, sell, disclose or misuse data stored on your network, including digital assets
• Alter, damage or destroy software or programs
• Introduce malicious software, including viruses and self-propagating code
• Disrupt operations by impairing or restricting access
• Deface or interfere with your organization’s website

Cybersecurity isn’t just the responsibility of your organization’s information technology (IT) department. While the IT team shoulders responsibility for the technical elements of your strategy, like firewalls, encryption and permission structures, all employees are ultimately responsible for ensuring cybersecurity. Make training for all employees the foundation of your cybersecurity strategy and maintain ongoing education that alerts employees to potential threats and helps them take a “verify first” approach to data requests, email attachments and clickable links.

Final Comments

Implementing innovative solutions to navigate uncertainwaters and address recessionary concerns will enable you to succeed in 2023.Addressing inflation, workplace concerns and cybersecurity can help youstreamline practices and enable your company to thrive. If you don't know whereto start, you may want to seek outside help to redesign or find cost-savingsolutions.

¹2022 Data Breach Investigations Report, Verizon, May 2022.

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